News Release

“It’s Not a Cliff”

November 13, 2012

CHRIS HELLMAN [email]
MATTEA KRAMER [email]
Hellman is communications liaison at the National Priorities Project and specializes in the military budget. Kramer is senior research analyst there, and lead author of A People’s Guide to the Federal Budget. They recently wrote the piece “Washington’s Cliff Notes” for TomDispatch. It states: “Ignore the sound and fury. While prophecy is usually a perilous occupation, in this case it’s pretty easy to predict how lawmakers will deal with nearly every challenge on the president’s and Congress’s end-of-year obstacle course. …

“Once again, it’s all about politics, not about the stuff that actually matters — a reality that becomes more obvious with the next two obstacles. There’s a bundle of expiring provisions in the tax code — known esoterically as ‘tax extenders’ and the Alternative Minimum Tax ‘patch’ — that benefit corporations and upper-middle class Americans, respectively. Congress will likely extend these expiring provisions without much discussion, just as they’ve done in the past.

“Next obstacle: health care. The Affordable Care Act — Obamacare — includes a handful of new taxes that will go live in 2013. … These taxes will likely go into effect right on schedule, but they’re so small they’ll have next to no discernible impact on the economy. …

“And then there’s the 21st century obstacle of obstacles in American politics: the Bush-era tax cuts for the high-income set. President Obama has said he will veto any legislation that keeps them in place, while Republicans in Congress insist that extending them must be part of any deal to maintain low rates for everyone else.

“Among all the spending and tax changes in the queue, and all the hype around the cliff, the great unknown is whether it’s finally farewell to the Bush tax cuts for the wealthy. And that’s no perilous cliff. Letting those high-end tax cuts expire would amount to a blink-and-you-miss-it 0.003% contraction in the U.S. economy, according to Moody’s, and it would raise tens of billions of dollars in desperately-needed tax revenue next year. …

“On this, as on all other matters in the fiscal obstacle course, it’s not the economy. It’s the politics, stupid.”